tricks to Paying Off Student Loans

The total outstanding student loan debt in the US is 1.2 trillion. That’s trillion with a “T”. Trillion with twelve zeros. $1,200,000,000,000+.

I can’t reduce the national average,

but I can offer some creative tricks to paying off your student loans faster.

Student loan debt is the second-highest level of consumer debt behind only mortgages. The average sales price of a new house being $365,600 (as of Jan 2016). The average income in the US is $81,400, with men averaging $90,761 and women averaging $50,756 annually. Keep in mind, this is average income of every American. These figures do not take into account levels of education, age, or individual situations.

I throw all these facts at you to remind you that this is a national crisis. It’s easy to feel hopeless, but let me remind you that feeling overwhelmed with your student loan debt is acceptable. Going to college is not a mistake, and you’re NOT alone in this fight to pay them off. My personal opinions aside…

Here’s a few tips for paying off student loans faster.

Refinance and consolidate them.

This is one of the best things that you can do to cut student loan costs and pay it off faster. Look for options to refinance your loans at a lower rate, and consolidate multiple student loans into one single monthly payment. Student loan rates are usually between 4% -8%. If you look around, you can find consolidation rates below 3%. That means saving thousands of dollars. Do it.

Pay more than the minimum.

This is one of the easiest tricks you can use on all of your debt. Rather than paying the bare minimum, pay anything extra that you can afford each month. Any extra cash that you pay will go straight towards the principle of the loan (no interest!). I suggest setting up automatic payments with the extra amount included. By doing this, it becomes an automatic process that you don’t have to think twice about.

Likewise, paying your loan every two weeks rather than once per month gives you a hidden advantage: You will end up making 13 payments per year instead of 12. Plus, if you get paid bi-weekly, you won’t feel the pain of paying the extra amount. Here’s the strategy:

Take your monthly payment, and divide that amount in half.

Make a payment of this amount every two weeks.

That’s it! Done!

Find employment in industries that offer loan forgiveness.

Certain industries such as public service work and teaching may offer programs for loan forgiveness. This free money could wipe away some or ALL of your loan balance. If you meet the guidelines… be sure to apply!

Got a raise? Skip the new TV. Go after debt free.

If you get annual pay increases, you’ve got a great tool to chip away at the loan. Rather than buying a big TV or a flashy car, why not put some of that new-found salary towards your loans? I suggest keeping 50% of your raise for your personal goals, and setting up the other 50% towards your student loans.

Trim your budget.

If you can’t earn more money, spend less. It may not be easy, but making calculated moves to trim your budget could help you make a big difference in your loan balance. It might mean finding a cheaper apartment, eating our less, or cancelling cable TV. Your options end with your creativity. Even if you can’t do this for years at a time, try cycling through budget-cuts every so often and enjoying a “no spending month” where you avoid buying anything that isn’t necessary. Every dollar that you free up can be used to pay down your balance.

New money? Put it to work.

Did you win the lottery? Inherit some cash? Get a bonus at work? Tax refund? You could spend it on random stuff that you won’t remember in a few years, or you could apply it towards your student loans. When you find yourself with extra cash, even if you don’t want to use all 100% of it towards your debt, be sure to put something towards your student loans. It will help in the long run.

Be strategic about your loans.

You probably have multiple loans at multiple rates. It makes the most sense to pay off the highest interest loans first using the debt avalanche method (check it out HERE) by paying just the minimum payments on everything but the loan with the highest rate. Once that one is paid off, move on to the next one.

Also, consider paying off private loans first. They often have worse interest rates and less-flexible terms compared to their federal backed counterparts.

Don’t use repayment programs.

You may be focused on lowering your monthly payment. This is a great idea if the payment is too high to pay each month, but if you want to pay the loans off faster… repayment programs aren’t your friends. These programs decrease your monthly payment by stretching out your loan across a longer term. Longer term = More years you have to pay.

Remember. Student Loans aren’t “good debt”.

While student loans are generally a good investment based on the potential to earn higher incomes in your life, it’s not a good debt to keep around. You can always be strategic about using student loans to secure a better job (potentially one that will result in student loan forgiveness), but dragging out repaying them because they are a “good debt” is a bad idea. Letting them sit around forever will cause the interest fees to stack up, and the tax deductions don’t add up to offset the money that you’ll lose to interest.